A cluster of new energy-themed funds established during the sector’s 2022 peak are now facing liquidation after failing to meet minimum size requirements during their three-year initiation period. Data shows nearly half of all new energy funds had assets below 200 million yuan by Q1 2025, highlighting the risks of launching thematic products at market tops.
The Liquidation Wave
Since May, multiple new energy funds have issued liquidation warnings, all tracing their origins to 2022 when the sector was at its zenith. As initiation-period funds, they required minimum 200 million yuan assets after three years – a threshold six such funds have already failed to meet in 2024 alone.
Morningstar China senior analyst Dai Jingxia explained the downward spiral: “Overcapacity in solar, price wars in energy storage, and slowing EV demand growth hammered sector indexes. Funds launched at peak valuations with concentrated bets suffered disproportionately when the tide turned.”
Tianxiang Investment Advisory analysts noted the crowded field of similar products made it difficult for underperformers to retain assets. “Investors have options – they’ll naturally gravitate toward funds demonstrating better alpha generation,” a representative said.
Standout Performers Defy Trend
While many funds shrank, some notable exceptions flourished through the downturn. Yang Ruiwen’s Invesco Great Wall New Energy Industry fund maintained nearly 6 billion yuan in assets, outperforming its benchmark by over 40 percentage points since 2021 inception. Similarly, Li Bo’s Xinao New Energy Selection fund delivered 57.58% returns since 2021 launch, beating its benchmark by 80+ points.
Dai Jingxia highlighted their differentiated approaches: “Successful managers diversified across新能源subsectors and adjusted exposures dynamically. Some even included non-correlated assets as hedges during volatility.”
Industry Reckoning
The boom-bust cycle has prompted soul-searching across asset management. The recently released “Action Plan to Promote High-Quality Development of Public Funds” emphasizes shifting focus from scale to investor returns throughout product development and operations.
Dai outlined necessary reforms: “Managers must resist chasing trends and implement countercyclical product launches. Building research capabilities before products, and prioritizing long-term performance in compensation are critical.”
For investors, she advises caution: “Thematic funds concentrate risk. Diversification remains essential, especially when sector euphoria peaks.” The experience underscores how product timing and disciplined portfolio construction separate transient fads from sustainable strategies.
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